China lockdowns increase profit risk for chip companies, automakers and industrialists

April 27 (Reuters) – Industrial companies such as GE (GE.N), chipmakers such as SK Hynix (000660.KS) and carmaker Mercedes Benz (MBGn.DE) have warned that tough restrictions imposed by COVID-19 in China were intensifying supply chain disruptions and increasing uncertainty about the business outlook.

China’s ‘zero Covid’ policy to tackle the Omicron variant has led to further lockdowns, forcing factories to close and worsening a global supply chain lockdown. More than 40 cities are in total or partial confinement, and Shanghai, the country’s financial capital, has been isolated for more than a month. Read more

It cast a veil over financial markets worried about a blow to the global economy which is just recovering from the crisis caused by the pandemic.

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And even as companies scramble to cope with soaring costs of everything from labor to raw materials, Russia’s invasion of Ukraine and related Western sanctions have driven up prices of electricity. ‘energy.

“Collectively, supply chain issues, the Russian-Ukrainian war, and the impacts of COVID in China negatively impacted revenue in the quarter by approximately 6 percentage points,” the CEO of General Electric said Tuesday. , Larry Culp.

Culp, who doesn’t expect GE to fully offset inflation this year, said the company is looking at costs and becoming more decentralized to run its business closer to customers and improve pricing. Read more

3M (MMM.N), another US industrial giant, said on Tuesday that shutdowns in China and the Ukraine crisis slowed sales in April.

The company, already struggling with chip shortages and high raw material costs, said it would continue to raise prices to offset inflation and supply chain costs, echoing GE’s said it has already raised prices and invoked price escalation clauses in its service contracts.

Shares of Japanese brewer Asahi Group (2502.T) jumped on Wednesday after announcing its first hike in canned beer prices in 14 years to cope with rising costs for materials, energy and transportation. Read more

South Korea’s SK Hynix, the world’s second-biggest memory chipmaker, said China’s lockdown was the biggest risk of weakening demand for chips in mobile and personal computers, though it s Expected a recovery in the second half as manufacturers rolled out new product launches before the year-end shopping season. Read more

Fellow LG Display Co Ltd (034220.KS) said supply chain issues caused by lockdowns affected panel production and shipments in the March quarter. Read more

“In the smartphone market, demand growth is slowing, particularly in China, and mobile memory chip shipments are expected to increase in the early single-digit percentage, slightly lower than expectations at the start of the year.” , said Kevin Noh, Chief Marketing Officer. SK Hynix officer said in a conference call Wednesday.

U.S. chipmaker Texas Instruments reported disruptions at its customers’ factories on Tuesday and forecast current-quarter revenue below Wall Street estimates. Read more

French-Italian chipmaker STMicroelectronics (STM.BN), which counts Apple (AAPL.O) and electric car maker Tesla (TSLA.O) among its customers, reported a temporary drop in production on Wednesday due to the restrictions imposed by China. Read more

Tesla said last week that it had lost about a month of construction volume from its Shanghai factory due to shutdowns and that production had resumed at limited levels, which would impact deliveries in the quarter. April June. Read more

Mercedes-Benz said Wednesday it expects supply chain bottlenecks and chip shortages to hurt its business throughout the year and warned of further uncertainty regarding production and market development due to lockdowns in China. The premium automaker, like other automakers including Tesla and GM (GM.N), raised prices to offset inflationary costs. Read more

Some European companies, including EssilorLuxottica (ESLX.PA), which makes eyewear for Prada and Versace (CPRI.N), and Gucci owner Kering (PRTP.PA), have also warned that lockdowns in China are hurting sales . Read more

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Reporting by Joyce Lee and Heekyong Yang in Seoul, Rajesh Kumar Singh in Chicago, Abhijith Ganapavaram, Aishwarya Nair and Sonia Cheema in Bangalore; Victoria Waldersee in Berlin, Mathieu Rosemain in Paris; Written by Sayantani Ghosh; Editing by Shri Navaratnam

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